*Minimum of 500 words* Lowman Inc. sells a product with a sales price of $25 per...
*Minimum of 500 words*
Lowman Inc. sells a product with a sales price of $25 per unit, variable costs of $10 per unit, and total fixed costs of $100,000. Lowman is looking into implementing an aggressive advertising campaign that will cost $45,000.
By what amount do sales dollars need to at least increase by in order for the company's overall profits to not decrease by having the advertising campaign?
Homework Answers
| Contribution Margin In Percentage = (sales Price- variable cost per unit )/ Sales Price | |||||
| = ( $25-10) /25 | |||||
| =60 % | |||||
| Increase in fixed cost = $45000 | |||||
| Hence the minimum increase in the sales dollar | |||||
| in order for the company's overall profits to not decrease by having the advertising campaign | |||||
| = Advertising cost / contribution margin ratio | |||||
| =$45000/60% | |||||
| $ 75,000 | |||||
| Please upvote. | |||||
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*Minimum of 500 words*
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